Worm Turning in Transports, FBR Says

By Dimitra DeFotis

ASSOCIATED PRESS

Loading onions at a Lyons, Ga. farm.

FBR upgraded Expeditors International and Downgraded Atlas Air Worldwide, on the thesis that “pricing power for global freight forwarders is improving, while the imbalance of airfreight capacity and demand will continue to challenge airfreight carriers.”

The firm moved its rating on Expeditors International of Washington (EXPD) to Outperform from Market Perform and downgraded Atlas Air Worldwide Holdings (AAWW) to Market Perform from Outperform. The pairing shows a shift “from asset heavy to asset light.”

Shares of Expeditors are up 2.7% in midday trading to $39.07.

FBR raised its 12-month price target on Expeditors to $48 from a $38, based on a multiple of 23 times a 2014 earnings-per-share estimate of $2.05. FBR added Expeditors to its Top Picks list and removed Ryder System (R), though writes “significant upside remains in Ryder shares (we reiterate our Outperform rating and $82 price target), but … we believe Expeditors represents the most compelling investment idea in our coverage.”

FBR writes:

“Pricing, volume trends increasingly favor freight forwarders in global cargo markets; Expeditors best-positioned name. Based on a combination of declining inventory levels, an incrementally stronger U.S. dollar, increased business and consumer confidence, and projections for a number of new high-tech product launches this fall, we expect the 2013 peak shipping season (August to November) to be the most robust in years. This is a relative comparison, and freight volumes should continue to underperform pre-recession levels, but when compared to the lackluster seasons of 2011-2012, we expect the 2013 improvement to be material.”

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